4.1 – Quick recap

If the frequency of transactions (buy/sells) is high, it is best to consider them as trades and not investments. If considered as trades, any income is non-speculative business income, whereas if these are investments, then it falls under capital gains.

Keeping this in perspective, you may have few questions –

What is long term?

What is considered high frequency of transactions (buy/sells)?

We discussed this in the previous chapter, but just to refresh your memory – there is no set rule from the IT department to quantify ‘frequency’ or determine ‘long term’.

As long as your intent is right, and you are consistent across financial years in the way you identify long term or high frequency, there is nothing to worry.

Do note, if you are indulging in equity delivery based trades as frequent as a few times every week, it would be best to consider all of them as ‘trades’ and classifying income from them as business income instead of capital gains.

Reiterating again that if investing/trading on the markets is the only source of income, and even if you are trading with moderate frequency, it is best to classify income from all your equity trades as a business income instead of capital gains.

On the other hand, if you are salaried or have some other business as your primary source of business, it becomes easier to show your equity trades as capital gains even if the frequency of trades is slightly higher.

Updated 2nd March 2016

Finally the income tax department has brought in clarity by allowing an individual to decide on his own to either show his stock investments as capital gains or as a business income (trading) irrespective of the period of holding the listed shares and securities. Whatever is the stance once taken, the taxpayer will have to continue with the same in the subsequent years. Check this circular.

So essentially,

Stocks that you hold for more than 1 year can be considered as investments as you would have most likely received some dividends and also held for longish time

Shorter term equity delivery buy/sells can be considered as investments as long as frequency of such buy/sells is low.

If you wish, you can also show your equity delivery trades as a business income, but whatever stance you take, you should continue with it in the future years as well.

The focus of this chapter is on investing; hence we will keep the discussion limited to just points 1 and 2. We will talk about taxation when trading/business income in the next chapter.

4.2 – Long term capital gain (LTCG)

Firstly you need to know that, when you buy & sell (long trades) or sell & buy (short trades) stocks within a single trading day then such transactions are called intraday equity/stock trades. Alternatively if you are buying stocks/equity and wait till it gets delivered to your DEMAT account before selling it, then it is called ‘equity delivery based’ transactions.

Any gain or profit earned through equity delivery based trades or mutual funds can be categorized under capital gains, which can be subdivided into:

Long term capital gain (LTCG): equity delivery based investments where the holding period is more than 1 year

Short term capital gain (STCG): equity delivery based investments where the holding period is lesser than 1 year

Taxes on long term capital gains for equity and mutual funds are discussed below –

For stocks/equity – 0% for first Rs 1lk and @10% exceeding Rs 1lk

The above taxation rate is only if the transactions (buy/sells) are executed on recognized stock exchanges where STT (Security transaction tax) is paid. As discussed above, LTCG is for holding period more than 1 year.

If the transactions (buy/sells) are executed through off-market transfer where shares are transferred from one person to another via delivery instruction booklet and not via a recognized exchange by paying STT, then LTCG is 20% in case of both listed and non-listed stocks (Listed are those which trade on recognized exchanges). Do note that when you carry an off-market transaction Security Transaction Tax (STT) is not paid, but you end up paying higher capital gains tax.

Note that a gift from a relative through DIS slip is not considered as a transaction and hence not capital gain. It is important that gift not be treated as transfer, and relative could be (i) spouse of the individual (ii) brother or sister of the individual (iii) brother or sister of the spouse of the individual(iv) brother or sister of either of the parents of the individual (v) any lineal ascendant or descendant of the individual(vi) any lineal ascendant or descendant of the spouse of the individual (vii) spouse of the person referred to in clauses (ii) to (vi)

Similar to equity delivery based trades, any gain in investment in equity oriented mutual funds for more than 1 year is considered as LTCG and exempt from taxes upto Rs 1lk per year. A mutual fund is considered as equity oriented if at least 65% of the investible funds are deployed into equity or shares of domestic companies.

For non-equity oriented/Debt MF – flat 20% on the gain with indexation benefit

Union budget 2014 brought in a major change to non-equity mutual funds. As opposed to 1 year in equity based funds, you have to stay invested for 3 years in non-equity/debt funds for the investment to be considered as long term capital gain. If you sell the funds within 3 years to realize a gain, then that gain is considered as STCG.

4.3 – Indexation

When calculating capital gains in case of non-equity oriented mutual funds, property, gold, and others where you are taxed on LTCG, you get the indexation benefit to determine your net capital gain.

I guess we would all agree that inflation eats into most of what is earned as profits by investing into capital assets such as the ones mentioned above.

For someone wondering what that inflation is, here is a simple example to help you understand the same –

All else equal, if a box of sweets priced at Rs.100 last year, chances are the same could cost Rs.110 this year. The price differential is attributable to Inflation, which in this example is 10%. Inflation is the % by which purchasing value of your money diminishes.

Assuming the average inflation rate in India of around 6.5%, if you had invested into a debt fund, wouldn’t a big portion of your long term capital gain at the end of 3 years get eaten away by inflation?

For example assume you had invested Rs.100, 000/- into a debt fund, and you got back Rs 130,000/- at the end of 3 years. You have a long term capital gain of Rs.30,000/-. But in the same period assume purchasing value of money is dropped by 18k because of inflation. Should you still pay long term capital gain on the entire 30k? Clearly this does not make sense right?

Indexation is a simple method to determine the true value from sale of an asset after considering the effect of inflation. This can be done with help of Cost inflation index (CII) which can be found on the income tax website.

Let me explain this with an example of a purchase/sale of a debt mutual fund.

Purchase value: Rs.100,000/-

Year of purchase: 2005

Sale value: Rs 300,000

Year of sale: 2015

Long term capital gain: Rs 200,000/-

Without indexation I would have to pay tax of 20% on the capital gains of Rs 200,000/-, which works out to Rs 40,000/-.

Indexed purchase value = Purchase value * (CII for year of sale/ CII for year of purchase)

So –

Indexed purchase value = Rs 100000 * (1024/497)

= Rs 206036

Long term capital gain = Sale value – Indexed purchase value

Therefore, in our example

LTCG = Rs 300,000 – Rs 206,036

= Rs 93,964/-

So the tax now would be 20% of Rs 93,964 = Rs 18,792, much lesser than Rs 40,000/- you would have had to pay without the indexation benefit.

Like I had said earlier, the indexed purchase value can be calculated using the above method for all long term capital gains which are taxable like debt funds, real estate, gold, among others. You could use the IT department’s Cost inflation index utility to check on indexed purchase value of your capital assets instead of having to calculate manually.

Interesting thing to note in regards to 20% after indexation for non-equity oriented or debt funds: Most of these funds return between 8 to 10% and typically inflation in India has been around that for the last many years. So with the indexation benefit, you typically won’t have to pay any tax on LTCG of non-equity oriented funds.

4.4 – Short term capital gain (STCG)

Tax on short term capital gains for equity and mutual funds are discussed below –

For stocks/equity: 15% of the gain

It is 15% of the gain if the transactions (buy/sells) are executed on recognized stock exchanges where STT (Security transaction tax) is paid. STCG is applicable for holding period over 1 day and not more than 12 months.

If the transactions (buy/sells) are executed via off-market transfer (where shares are transferred from one person to another via delivery instruction booklet and not on the exchange) where STT is not paid, STCG will be taxable as per your applicable tax slab rate. For example, if you are earning over Rs.10,00,000/- per year in salary, you will fall in the 30% slab, and hence STCG will also be taxed at 30%. Also STCG is applicable only when the income exceeds the minimum tax slab of Rs 2.5lks/year. So if there is no other income for the year and assuming there was Rs 1lk STCG, it would not entail the flat 15% tax.

For equity mutual funds (MF): 15% of the gain

Similar to STCG for equity delivery based trades, any gain in investment in equity oriented mutual funds held for lesser than 1 year is considered as STCG and taxed at 15% of the gain. Do note a fund is considered Equity based if 65% of the funds are invested in domestic companies.

For non-equity oriented/Debt MF: As per your individual tax slab

Union budget 2014 brought in a major change to non-equity mutual funds. You have to now stay invested for 3 years for the investment to be considered as long term capital gain. All gains made on investments in such funds held for less than 3 years are now considered as STCG. STCG in this case has to be added to your other business income and tax paid according to your income tax slab.

For example, if you are earning around Rs 800,000/- per year in your normal business/salary and you had STCG of Rs 100,000/- from debt funds, you will fall in the 20% slab as your total income is Rs 9,00,000/-. So effectively in this example you will pay 20% of STCG as taxes.

4.5 – Days of holding

For an investor, the taxation difference between LTCG and STCG is quite huge. If you sold stocks 360 days from when you had bought, you would have to pay 15% of all gains as taxes on STCG. The same stock if held for 5 days more (1 year or 365 days), the entire gain would be exempt from taxation as it would be LTCG now.

It becomes imperative that you as an investor keep a tab on the number of days since you purchased your stock holdings. If you have purchased the same stock multiple times during the holding period, then the period will be determined using FIFO (First in First out) method.

Let me explain –

Assume on 10th April 2014, you bought 100 shares of Reliance at Rs.800 per share, and on June 1st 2014 another 100 shares were bought at Rs.820 per share.

A year later, on May 1st 2015, you sold 150 shares at 920.

Following FIFO guidelines, 100 shares bought on 10th April 2014 and 50 shares from the 100 bought on June 1st 2014 should be considered as being sold.

Small little sales pitch here 🙂 – if you are trading at Zerodha the holdings page in our back office assistant Q will keep a tab for you on number of days since your holdings were purchased, and even a breakdown if bought in multiple trades.

Here is a snapshot of the same –

The highlights shows –

Day counter

A green arrow signifying holdings more than 365 days, selling which won’t attract any taxes.

If you have bought the same holdings in multiple trades, the split up showing the same.

Besides Zerodha Q, equity tax P&L is probably the only report offered by an Indian brokerage which gives you a complete breakdown of speculative income, STCG and LTCG.

4.6 – Quick note on STT, Advance Tax, and more

STT (Securities Transaction Tax) is a tax payable to the government of India on trades executed on recognized stock exchanges. The tax is not applicable on off-market transactions which is when shares are transferred from one DEMAT to another through delivery instruction slips instead of routing the trades via exchange. But off market transactions attracts higher capital gains tax as explained previously. Current rate of STT for equity delivery based trades is 0.1% of the trade value.

When calculating taxes on capital gains, STT can’t be added to the cost of acquisition or sale of shares/stocks/equity. Whereas brokerage and all other charges (which includes exchange charges, SEBI charges, stamp duty, service tax) that you pay when buying/selling shares on the exchange can be added to the cost of share, hence indirectly taking benefit of these expenses that you incur.

Advance tax when you have realized capital gains (STCG)

Every tax payer with business income or with realized (profit booked) short term capital gains is required to pay advance tax on 15th June, 15th Sept, 15th December, and 15th March. Advance tax is paid keeping in mind an approximate income and taxes that you would have to pay on your business and capital gain income by the end of the year. You as an individual are required to pay 15% of the expected annual tax that you are likely to pay for that financial year by 15th June, 45% by 15th Sept, 75% by 15th Dec, and 100% by 15th March. Not paying would entail a penalty of annualized interest of around 12% for the period by which it was delayed.

When you are investing in the stock markets, it is very tough to extrapolate the capital gain (STCG) or profit that will be earned by selling shares for an entire year just based on STCG earned for a small period of time. So if you have sold shares and are sitting on profits (STCG), it is best to pay advance tax only on that profit which is booked until now. Even if you eventually end up making a profit for the entire year which is lesser than for what you had paid advance tax, you can claim for a tax refund. Tax refunds are processed in quick time by the IT department now.

ITR3 (ITR 4 until 2017): When you have business income and capital gains

ITR 2: When you have salary and capital gains or just capital gains

4.7 – Short and long term capital losses

We pay 15% tax on short term capital gains and 0% on long term capital gains, what if these were not gains but net losses for the year.

Short term capital losses if filed within time can be carried forward for 8 consecutive years, and set off against any gains made in those years. For example if the net short term capital loss for this year is Rs.100,000/-, this can be carried forward to next year, and if net short term capital gain next year is say Rs.50,000/- then 15% of this gain need not be paid as taxes because this gain can be set off against the loss which was carried forward. We will still be left with Rs Rs.50,000 (Rs.100,000 – Rs.50,000) loss which be carried forward for another 7 years.

Long term capital losses can now (post introduction of LTCG [email protected]%) also be set off against long term gains.

559 comments

In the previous chapter you mentioned that Speculative loss can be carried forward only for 4 year whereas in the section 4.7 it is mentioned that, the period is 8 years. Please clarify which is correct.

Praveen, speculative or intraday equity trading losses can be carried forward to 8 years. What we are talking about in Section 4.7 is not intraday equity losses but short term equity losses (short term delivery based trades).

I have a Trading and Demat account with Zerodha. I want to clear my doubt regarding Transfer of shares to own demat account.
Scenario:
I bought shares 200 shares of Infosys through Zerodha and transferred it to HDFC demat for pledging purpose(LAS).After paying back loan and unpledging shares, I re- transferred it to Zerodha demat. I holded 200 Infosys shares for over 1 a year (3 months in zerodha demat and 10 months in HDFC demat. Will my holding period of more than 1 year continue(eligible under LTCG) after transferring it firstly to HDFC demat and than again to Zerodha demat?
CATEGORY IS”transfer to own account”.

Is there a write up on the grand fathering clause for LTCG on sale of equities that might be useful for 31.3.2019 calculations. How does this will get authenticated by the tax officials, our declaration/returns?

Thank you so much Zerodha. I have one question please. If STCG is Rs25000/- so I pay 15% on that..right which gives me profit Rs21250/-.
Now if I have other income from rentals /FDs totalling to Rs300,000/- . Now do I have to add the Rs21,250/- to the Rs300,000/- and then find out my total tax liability or the STCG doesnt hv to be taken in this calculation as it has already bben taxed. Please advise.

I think you wanted to mention that “Speculative losses i.e. Intraday equity losses” can be carried over for a period of 4 years only… whereas the “Short term equity losses” can be carried over for a period of 8 years. Please correct if my understanding is wrong.

I think for “4.7 – Short and long term capital losses” you need to update below para as now LTCGs are taxed.

“Long term capital losses can’t be used to set off against long term gains as in the first place long term capital gains is exempt from any tax. So long term capital loss is a dead loss, and can’t be set off or carried forward.”

Suppose i bought 100 shares @ 10 and sold 50 shares @ 20 to recover my investment within 1 year. And sold another 50 shares after 1 year holding. I am in 10% tax bracket. So what will be tax implications in this situation.

Fantastic. I had no ideas on taxation. What were amts. Just been filing form 16 by my company. Now That i am only trading zerodha gave me a brighter picture. Thank u Nitin. My friends trading (non zerodha) are not aware of most of these facts. I should enlighten them on the same. Excuse me for my spelling.

Hi Nitin,
thanks for this wonderful forum.
I and a NRI based in UAE and have following questions.
1. while discussing with a few freinds came cross trading SGX nifty options on singapore exchange through a international broker through my overseas US dollar account. If I decide to go ahead with this. what will be the tax implications in India. as of now I have investments in equities and MF through my NRE account and a Indian broker and have invested for long term gains selling mostly after 1-2 years. will trading in SGX nifty options make a me a trader for Indian taxation and returns perspective?
2. through my total investments of around 65 lakhs. If my total income is only NRE deposits interest ( tax exempt), LTG and dividends from equities/MF investments( tax exempt) NRO deposit saving interest around 20K with 30% TDS deducted. in this case as mostly all income is tax exempt and total income is less than 250,000 do I need to file returns.
3. If I have to file returns while filing returns do we need to show LTG, dividend income and NRE deposit interest in the returns forms?

Dear Nitin,
i have received shares as gift from my mother in law, i have hold the shares for about 18 months, now i am in need of funds for buying property so i want to sell them, what will be the taxation. Also i normally give all details to my CA for filing returns, i had not mentioned the receipt of shares as gift in my ITR in that year but my Dmat statement can reflect the date of receipt of shares in my account. Please advice asap…

sir suppose I am trading with two broker 1-nine star broking pvt ltd & 2- is zerodha . I purchase 100 share of sbi on 14.6.2014 on nine star & 100 share of sbi on 15.6.15 at zerodha. if I sell 100 share of sbi on 20.8.2015 at zerodha then according to FIFO witch share would be count as trading nine star ( more then one year–LTCG) or zerodha(less then one year–STCG) for incom tax purpose

Hi Nitin,
I had 800 Shares of IDFC Ltd for past 2 years with an average price of 100 Rs which recently got demerged and I got 800 free shares of IDFC Bank.
I have following queries.
1. how do I adjust the portfolio for each share to reflect correct profit loss for taxation purpose?
How to arrive at the correct price for each for my portfolio?
2. Do I keep the IDFC Ltd price same and put new entry in to portfolio for IDFC bank( again confusion is at what price as I received it free)
3. If I sell IDFC Ltd I guess that qualifies as LTG? am I correct? but the price has gone down by almost 50% now so its a loss.
4. If I sell IDFC bank does that qualify as LTG? if no How will be taxation on that be calculated? as I had got these Shares for free?

Ah.. had missed this query.
Firstly, the holding period (based on date of purchase) for both the stocks will remain the same based on the purchase of the original IDFC ltd. So if it was long term before, it will continue to be long term for both IDFC and IDFC bank.
To determine cost of Acquisition IDFC had shared this with all the share holders.

If you have purchased equity shares of IDFC Limited prior to the Record Date, to determine post demerger cost of acquisition for equity share(s) of IDFC Limited and IDFC Bank Limited, you are advised to apportion your pre demerger cost of equity share(s) of IDFC Limited in the following manner:

Name of the Company % of Cost of Acquisition of IDFC Limited equity shares
IDFC Limited 60.58
IDFC Bank Limited 39.42

So if you originally had IDFC purchased at Rs 100. You can mention the cost of the new IDFC as Rs 60.58 and for IDFC Bank as Rs 39.42. So your long term profit and loss will be based on this.

How to compute tax on UTI Mutual funds ,if i bought them in 2010 with dividend reinvestment option and sold all of them in 2015 ?
Will the units bought using reinvested dividend for period Jan 15 to Dec 15 be considered as STCG ?

I trade in F&O & hence it is NON SPECULATIVE business as per definition. In addition I buy NIFTY ETFs and SELL them only after one year plus. Since no LTCG on Nifty etf trades so Do I have to reflect Nifty trades in ITR4 ? Or I can ignore Nifty etf trades since holding period more than one yr..

I’ve some doubt about the long term holding. If i arbitrage (“Sell NSE & Buy back immediate on BSE” ) on the “HINDUNILVR” on 783 days holding period, it’s still remaining on 783 holding period or taken as fresh holding days for counting.

I am a Zerodha customer and Highly appreciate the module on Taxation. I have a question based on a off-market transaction you mentioned in this module:

“Do note that when you carry an off-market transaction Security Transaction Tax (STT) is not paid, but you end up paying higher capital gains tax. A typical example of an off-market transaction could be a father transferring equity holdings to his son via a ‘delivery instruction booklet’.”

Few Qs pertaining to the above point where the stock is listed and the equity is held for more than a year :

1. Any cash gifted to a ‘Relative’ is exempt from taxation. However, as per what has been stated above, the transfer of equity between Relatives via DIS attracts STCG/LTCG?
Can you please provide a link to substantiate the same?

2. Is there a way to transfer equity between ‘Relative’ that does not attract STCG or LTCG?

3. If equity is held in physical form and the same is transferred between Relatives, with the corresponding stamp duty being paid, does it still attract a STCG/LTCG?
Could you please provide a link?

4. In case 3, does the equity need to be classified as ‘Gift’ for tax purposes? Is the STCG/LTCG based on the holding period when equity was initially acquired or when the equity was transferred?

Hey Shri, my bad. Have corrected the post.
Note that a gift from a relative through DIS slip is not considered as a transaction and hence not capital gain. It is important that gift not be treated as transfer, and relative could be (i) spouse of the individual (ii) brother or sister of the individual (iii) brother or sister of the spouse of the individual(iv) brother or sister of either of the parents of the individual (v) any lineal ascendant or descendant of the individual(vi) any lineal ascendant or descendant of the spouse of the individual (vii) spouse of the person referred to in clauses (ii) to (vi)

3. If it is a transfer, it is a transaction and hence capital gain will apply. You need to show this as a gift, and yes physical demat certificates can be transferred between relatives.
4. Original holding period will continue

1. Not mandatory as the DIS slip will have reason mentioned as gift. But you can maybe get a confirmation letter from the relative in writing.
2. If original holder cost is not available, you will have to take it as 0.

Sir,
I have Dmat account on the name of A as ist holder (me) and B(Brother) as joint holder. I have another Dmat account with A(myself) as the sole holder.
If I transfer 95% of holdings(approx.150 companies) from Dmat account of A+B to another Dmat account A. My questions are:
1. What charges I have to pay to DP for transfer of shares from Dmat A+B to another Dmat A, if I give DIS for 95% of companies to DP
2. Regarding taxation on those 95% companies—I suppose my holding period should be counted for taxation purpose. For example if shares of RIL were hold for 11 months and if I sell those RIL shares say after 2 month of transfer into Dmat account A from Dmat account A+B (i.e 13 months total from date of purchase). I think LTCG will apply as holding period is 11+2=13 months (>12 Months).
Regards,
shanker

Hi Nithin,
I have a query regarding investments under 80C for non speculative income (I trade only Nifty Futures). Trading is the only source of income for me.
Last FY (2014 – 2015) I had shown a loss in my ITR of 6 lakhs (ITR was filed before due date). I know that if this FY (2015 – 2016), I show a gain of 4 lakhs, this will be offset with the 6 lakhs loss last year (I don’t have to pay any tax this year) and I will carry forward a loss of 2 lakhs for next year. My query is if I show investment of 1.5 lakhs under 80C this FY, will my income for this FY become 2.5 Lakhs (4 – 1.5 = 2.5) so that I can carry forward a loss of 3.5 lakhs for next FY (6 – 2.5 = 3.5)? or will 80C come into affect only after I have cleared my losses and show gains?
Kindly help.

80C and business income are part of different sections. SO if you have business gain of 4lks and loss of 6lks, they first get netted out to give you a 2lk loss that can be carried forward. You cannot declare it the way you have mentioned.

Hi Nithin,
Thanks for an easy explanation.
How are stock transactions in foreign exchanges taxed?
As an Indian national, If I gain profits from buying and selling in Nasdaq (both Long term and short term), how are these treated?

Hi,
I am salaried person.I have opened an account with zerodha in the last year and started trading/investing since 19th october, 2015. I have done both investing(equity delivery) and trading(intraday equity) in the last few months. In both cases I have gained profits but the losses are maximum. According to ‘EQ tax P&L breakdown – FY-15/16’, my
Short term Equity Total turnover : 2,29,114.80
Short term Equity Total realized profit : -20,318.50
Intraday Equity Total turnover : 16,692.95
Intraday Equity Total realized profit : -11,431.85.

So I am running under losses and I am not holding any security/stock in my demat account. My Questions are

1] Should I need to show these losses when I would file income tax return for the financial return 2015-2016?
2] Which ITR should I file?
3] Can I show the losses in both equity delivery and equity intraday trading as “investment”?

Hi,
Thanks for replying to my queries. I have few more questions.
1] Since I have not make overall profit both in equity delivery and equity intraday till now, so I did not pay any advance tax. Should I need to pay it?

Hi,
I exercise only Equity Delivery and would like to know what would constitute high-frequency-trade in order to determine business or capital gain income. You have mentioned that, number of “trade”s few times per week on average over whole year can be viewed as business income rather than investment.
Q1. Does “trade” mean pair of buy and sell ?
Q2. If single buy or sell exercise can be seen as “trade”, does this mean 104 (2*52) equity delivery order execution per year i.e 2 times/week will be termed as business income ? (or can it be < 3 times/week i.e. 155 per year)
best regards
sai

Hey Sai, I have recently updated the chapter. CBDT has finally let the investor decide to choose if it were a business income or capital gain. Updated 2nd March 2016
Finally the income tax department has brought in clarity by allowing an individual to decide on his own to either show his stock investments as capital gains or as a business income (trading) irrespective of the period of holding the listed shares and securities. Whatever is the stance once taken, the taxpayer will have to continue with the same in the subsequent years. Check this circular.

I have recieved tax notice for AY 2014-2015 for trades in F&O. Zerodha Account was in the name of my wife and all other documents is in the name of my wife. She is a housewife with no income. Since there was a loss of Rs 1.5 Lacs I did not file income tax return. Moreover Income tax to be filed for income above Rs 2.5 Lacs. Please suggest what is to be done.

How is STCG calculated in below case: reliance inds bought 100 shares @ Rs. 920 on 12-02-2016. Again bought 50 shares of reliance Inds @ Rs.940 on 15-02-16. Again bought 50 shares @ Rs.950 on 26-02-2016. On 10-03-2016 done intraday in Reliance by selling 50 shares @ Rs.1020 and buying 50 reliance shares @ 1035. How is the sold quantiy on 10-03-2016 treated on basis of STCG. Is the intraday acitivity not considered for STCG as it is speculative acitivity but the same shares are with us in Demat account so net delivery is considered. Should the sold 50 quantities be sold on basis of FIFO for STCG bought on 12-02-16. Please clarify

Yes 2) is exempt (the recent circular has cleared all ambiguity) 3 can be carried forward as short term capital loss, 4) is speculative business income. This can’t be carried forward as short term capital loss, has to be shown as speculative business loss on ITR4.

Thank you, I am a satisfied client of zerodha and I have never ever seen any CEO getting involved in resolving petty queries of customers (probably even at the cost of your day job of managing the company). .. You are truly passionate about what you do and will remain a role model for entrepreneurs for many generations… All the best.

A follow-up question…
As mentioned earlier I have
1) Income from Salary (30% Tax bracket)
2) Income from Long Term Capital Gain (Holding period > 10 years)
3) Loss from Short Term Capital Gain (16K)
4) Loss from Intra-day (3K)

Now, if I have to declare my return in ITR-4, do I have to get audit done for all of 1), 2), 3), 4) or only on the total turnover for 4), which I am showing as speculative business loss?

Audit is required on the entire ITR (so all included). But since your intraday loss is so little and if you don’t really intend to carry forward this loss, you can show a small profit instead of a loss, and this could mean no need of getting an audit (as per section 44AD). If your CA is smart, he will know what to do.

I am salaried person. I had purchased 100 shares of sks microfinance in 2013 and sold them in Feb, 2016. I booked profit of Rs. 20000/-. I had also invested Rs. 5000/- in UTI banking sector fund (mutual fund) (equity fund) in may, 2013 and sold them in 2015 and booked profit of 1700/-. both these come under NIL tax liability as the holding period is more than one year. is it necessary to show these incomes or simply file ITR1?

I bought 100 shares of X on 01-May-2016 at Rs.100 per share. On Jun 17th its price is Rs.52. I again bought 100. On Jun 20(2 days after the last transaction date) I sold the earlier 100 shares at Rs.50. Will this be entitled as tax loss harvesting ? Please clarify as your post mentions sell first and buy same script after 2 business days

Nithin
I have one query…Suppose I buy 1000 shares of Tata Motors. Now I sell 500 shares after 6 months and rest of the 500 shares after 12 months.
Then I can take the benefit of long term capital gains(i.e No Tax) on 500 shares. Am I right?

Hi Nitin,
I am ZeroDHA customer. I have one more demat account, holding good amount of shares in it. All shares are purchase more than a year back. Now if I transfer that to zeroDHA demat account, Should I need to wait more than a year to sell to avoid short term capital gain? Or it is considered as long term holding? Basically I assume by doing off-market transfer to ZeroDHA I can save brokerage. Pls clarify.

I have moved my shares from ICICI to Zerodha DMAT. On Q I am suppose to enter the buy price for those shares. Please suggest should I enter the Price inclusive of STT and other tax components or the buy price ?

I invested only in delivery last year but the number of transactions i did with my 20 Lakh capital is 10. ie i bought and sold several stocks in last one year with this amount. Over all i made 6 lakhs profit ( stcg). I am really confused whether i have to show the full value consideration as 2 crore 6 lakhs (approx 10 x 20 lakhs+ 6.5 lakhs – Brokerage 0.5 lakhs) =20600000.
and cost of acquisition as 2 crore. This will project the money i invested is a huge amount. is it correct or wrong ?

How do i capture the money spending on purchasing research report, internet connection..etc..
Can i consider these amounts in cost of improvement ? if not what all items can be considered for cost of improvement.

Dear Nithin,
In the last paragraph
“Long term capital losses can’t be used to set off against long term gains as in the first place long term capital gains is exempt from any tax. So long term capital loss is a dead loss, and can’t be set off or carried forward.”
But in LTCG (non equity oriented) we are paying 20% on gain with indexation. If we get loss here, can it be set off and/or carry forward?

I have started my SIP for MF as Resident Indian for a 1 year. Now, I am NRI. I had switch off Equity to debt fund and vice versa. So,due these got profit of around 12K. So, Its STCG if I am not Wrong ? Also, I have done few transaction in delivery based in stock market and profit is very less. All transaction comes under STCG. So I have few question.
1). Should I have to pay STCG tax in IT return ?
2). When I came to knew that NRI profile its not easy to do trading. I had gifted all my holding to my mother. Would it be any problem ?
3). Which ITR form I should use ? Previously I was salaried person. So I was filing ITR1.

I am filing return as STCG where in profit is 10000 on a turnover of total 2 crore buy value and 2crore and 10 thousand. what should i fill in cost of acquisition and cost of sale in IT form 2. As my turnover is above 2 crore do i have to do TAX Audit as well.

1. In FY 15, I made profits in F & O trading and shown its income as other sources and filed ITR2
2. In FY 16, I made losses in F & O trading (~ 3 lacs on a turnover of 30 lacs). Can I file ITR2 and avoid tax audit by CA.
3. If I do not intent to carry forward losses, can I file ITR1 or ITR2 without showing the above losses.

I have following income
1. salary
2.long term capital gain from equity/equity mf
3.sort term capital gain from equity/equity mf
4.profit from intraday trading
5.profit from btst(without delivery )
6.loss from equity (without delivery)

I have following questions.
1. can I declare myself as Investor?
2. which ITR form I have to use.
3. Can I consider income from item 2 as LTCG?
4.Can I consider income from item 3 as STCG?
5.Can I combine income from item 4,5,6 and consider as speculative income?

Hi Nithin, I am a government employee and I have opened an account with Zerodha and do both intra day and delivery based trading. But o e of my colleague told me that we can not do trading in share market? Is this true? Please elaborate thanks .

Lets say I own a stock for 300+ days and suddenly I am expecting an intraday fall of say 15% , if I sell my holdings and buy it back again on the same day , does my cap gain status change for the same stock which I was holding for 300 days ? or any square off resets the counter and Upon rebuy the counter resets to 1 . please explain the taxation here.

3. what is the difference between business income and speculative business income?
4. suppose if i’m an investor , should i show the speculative business income under other income?
1. I don’t have time to maintain books. so i don’t want audit. so what type of trades( ltcg.stcg,intraday) ihave to do?
2. I want to take stance as an investor. so what type of trades( ltcg.stcg,intraday) ihave to do?

5. As i take stance as an investor , I have to show my income under capitalgains( which is not bother to do ltcg and stcg trades) only. I have not going to show my income under business income. suppose if i have done intra day trading , under which head ihave to show this ( business income or other income)? otherwise shall i have to restricted to do only ltcg and stcg trades as an ivestor stance?

Chiru, I am answering based on both your questions, whatever I can make sense of it.

1. As an investor, you can only show equity delivery investing as capital gains.
2. Intraday equity has to be shown as speculative business income.
3. If you have only capital gains, there is no need of an audit.

Suggest you to go through all the chapters, I have explained all that you have asked in detail already.

I have a question to ask.
I bought 100 shares of one company in year 1988 around sometime.
These are in name of my sister and myself(brother).
At that time i was having many folios in the same company due to Gift purpose in AGMs.
All the shares in other folios sold out in mean time.
This particular folio left unsold and shares are in physical forms till date.
The company grown up like anything and issued many bonus issues and splitting of shares from Rs 10 to Rs 1.
As a result, the holding increased by many folds and today its increased to 8000 shares from 100 shares in 1988.
The first name in Share certificate is of my sister, who not an income tax payee, whereas myself is salaried one and income tax payee.
My questions in this regard are:
1. Since I invested the money in origin for 100 shares, but my name is second in holding pattern, how can i get the shares transferred in my name.
2 I just want to transfer the shares in my name due to taxation issue, as the dividend received during the period is not shown anywhere.
And company is declaring handsome dividend of Rs 6.00 per share last year.
3 I am scared from taxing point of view. Whereas myself is investor and files the ITR 2 since long for showing STCG and LTCG. But due to second holder in subjected holding I am not able to show Dividend Income in my ITR under Tax free income.
I humbly seek your guidance.
I have an account with Zerodha in my wife’s name.
Regards

The best way to go about this is open a demat account with your sister as first holder and you as second. Convert the shares into demat. Once the shares are converted, you can either decide to keep them in this demat or transfer the shares into your individual demat account. There is no taxation aspect that you need to be worried about.
All dividends paid out by companies anyways don’t attract tax. Since all these stocks are held from 1988 (>1year) there is no capital gain tax as well. Even if you were to transfer shares from this joint demat to your individual demat, sister can gift brother without affecting the holding period or attracting any tax.

Sir,
I am currently unemployed, and living(and paying tax) on interest from FDs. After quitting my job, i also started investing in shares. In November 2016, i sold some shares which i had bought prior to March 2015. The amount is 3.5 lacs( i needed money for further investments, and also personal needs). However, although i understand from your lesson that i don’t have to pay tax( as it is long term CG), but where do i show it while filing my income tax (My understanding is that while i don’t have to pay tax, i do however have to disclose this). Please clarify?

my total buy / sell in a year is more than 2 crores . But I do only delivery based trading (min 5 days). I am showing the income as STCG. If have no other income except Interest and rent (Together less than 1 lack). My question is Whether Tax audit is applicable. I am ready to pay 15% tax on STCG. Is this right. If Frequency of trade is more then is there any problem

Nice to see some many queries answered and great job.
Had a confusion:
If equities are sold and the STCG are re-invested as business income, will that still be taxable?
Eg. A holding company running trades only(preferably both investing and speculative) can use the head of business income?
Been looking for a workaround on that front – any creative solutions if the re-investment way is not right?

i got a text from the IT department saying the last date of payment for the third installment of advance tax is 15th december. In the chapter above, you have said that 15th dec is the date for the second instalment. Can you clarify? I can send you a screenshot of the text.
Thanks.

From Assessment Year 2017-18 (Financial Year 2016-17) onwards the first installment of advance tax for the Individual as well as other assessees has been made uniform i.e. 15th June of the financial year.

Due Date Installment Payable
On or before 15th Jun, 2016 Not less than 15% of advance tax.
On or before 15th Sep, 2016 Not less than 45% of advance tax as reduced by the amount paid in the earlier installment.
On or before 15Th Dec, 2016 Not less than 75% of advance tax as reduced by the amount paid in the earlier installments.
On or before 15Th Mar, 2017 The whole amount (100%) of advance tax as reduced by the amount paid in the earlier installments.

So technically you have received the right notice.
15th of december is the tthird installment
You have to pay 75% of the estimated tax liability by 15th of december.

The new rules I am alluding to the links that Armaan has referred to in his post and also to the list of advance tax payment dates he has written.

I had gains by 15th sept towards which I payed advance tax according to the earlier (3 times a year sept, dec and march) regime. I did not pay 45% of the total tax on 15th sept, I paid 30%. There would be a penalty on the 15% that was not paid. To calculate that, I want to find out what date should I consider as the start of the “penalty period”? Were the new rules( 4 dates of payment) in effect beofre that? How do I calculate this penalty? Where should I go to pay this penalty? How do I notify the It dept that I have deposited the penalty amount?
Thanks

I have been doing the Intraday trading viz Equity and Nifty Futures from Mid October 2016. On Zerodha platform.There are some profits and losses in my account.Shall I need to pay any advance tax in December 20,16 particularly towards the above trading.Please reply per return.Regards.

” STCG is applicable for holding period over 1 day and not more than 12 months. ” suppose i bought share on 1 st aug. 2015 and sold on 31st july 2016. Here holding period is less than 12 months but 365 days completed (because of 29th feb). Will it be short term capital gain or long term capital gain.?

Hi karthik,
Recently i’ve opened an account with zerodha. Before this i use to trade through another brokerage firm .I have some shares in that(own) account and some in my father’s account, now i want to transfer them to zerodha account. How can i do that transfer and Any taxes will be levied on this transfer???
Thanks&Regards

When you transfer shares from your account or your immediate family account (as gift), there are no taxes applicable. Axis might charge you a small fee to transfer shares out of their demat. Check this answer.

Hi, On “LTCG for non equity/debt, gold/international etf”, isnt it true that you can calculate either 10% without indexation or 20% with indexation, and take whichever is lower? Above article seems to suggest 20% with indexation is the only option. Can you clarify pls.

Oh, I see. Its getting hard to keep track of the changes 🙂 Thanks so much for replying. On a separate note, want to thank you guys for setting up these tutorials; fantastic. I havent seen anywhere on the internet so far, such good content, adequately and elegantly described to a painfully detailed level (as a compliment), and consolidated. Thank you so much.
I havent been able to find a chapter that describes the zerodha’s trading tools (kite in particular) with examples on various types of orders. Is it there somewhere already? I have seen bits here and there, but a consolidated doc would really help.

A taxpayer who has earned long-term capital gains from transfer of any listed security or any unit of UTI or mutual fund (whether listed or not),not being covered under Section 112A,and Zero coupon bonds shall have the following two options:

a. Avail of the benefit of indexation; the capital gains so computed will be charged to tax at normal rate of 20% (plus surcharge and cess as applicable).

b. Do not avail of the benefit of indexation; the capital gain so computed is charged to tax @ 10% (plus surcharge and cess as applicable).

The selection of the option is to be done by computing the tax liability under both the options, and the option with lower tax liability is to be selected.”

The above reference is updated till finance act 2018.

So as per above quote/ref, even for FY 2018-19/AY 2019-20, the taxpayer still has two options to tax his LTCG on non equity/debt MF, non equity/debt MF, property, land/building, gold/silver etc. i.e. either 10% without indexation or 20% with indexation.

Please clarify whether the above inference is correct or not?

If not, please share a reliable source wherein it is clearly mentioned about tax rate as 20% with indexation ONLY and NOT as 10% without indexation in case of non equity/debt MF, property, land/building, gold/silver etc.

So, For above mentioned securities/cases for FY 18-19, it means we can exercise lowest of the two options viz. 20% with indexation or 10% without indexation as against the only option of flat 20% with indexation as mentioned in the chapter.
Right, Sir?

Taxes doesn’t work your way. If you have sold to recover the original amount invested it would be considered as a sum of investment + profit out of which you have to pay taxes on profit, now the remaining amount that still remains invested in the stocks can go to long term profit depending on how long you keep it. One thing to note is that this calculation is considering that you have already paid taxes on the initial investment amount.

The tax p&l shows a profit of -188.35 for intraday and SHORT TERM GROSS PROFIT ₹8,764.60…

How do I include this in my tax evaluation?? I think for short term gross profit (equity delivery) tax has already been deducted @15%. The total INTRADAY TURNOVER is ₹201.25 and SHORT TERM TURNOVER is ₹1,72,947.20. With this much turnover (small amount) do I need to file tax returns ?? Is there any minimum turnover amount for tax filing??

I job and used to file itr-4 for that in 20% tax slab. If I need to file tax for intraday amount how it has to be done? can I set off intraday loss(-188.35) against any like savings bank interest etc.

Sir,
I recently opened an account with Zerodha. I want to transfer shares worth 7 lakhs from husband DP account, which is with a different broker to my Zerodha DP account. Will there be any tax litigation involved for the transfer of shares ? Which option is safer to select in DIS slip….. ‘Transfer among family members’ or ‘ Gift” option. what will be the difference between these options? Please guide me.

My friend is a novice to trading. He want me to operate his account for a fees. i have my own separate account. I want some clarifications on
1. Whether i have to pay STCGT on the fees paid to me?
2. Whether he has to pay STCGT on the total profits?
3. If yes for both the above we are paying tax twice for the same amount. Is it correct?
Pl clarify?

In your example above (4.7 – Short and long term capital losses) I’ve an extended question. I’m now left with STCG of 50k losses in the 2nd year. Now in case i made long term capital gain of 1,00,000. I don’t have to pay any tax againt 1 lakh. Now my question to you is, even thought i made good profit in LTCG and i don’t pay tax on it, i still continue to enjoy the benefit of not paying tax till i make another 50k in profit under STCG to net off my losses to zero? and then pay taxes when i make profits only under STCG?

Hi Nithin,
I am new to Zerodha and stock business.
Below is my stock investment details in Zerodha.
INTRADAY GROSS PROFIT ₹222.65
INTRADAY TURNOVER ₹560.25
SHORT TERM GROSS PROFIT ₹155.30
SHORT TERM TURNOVER ₹55,913.55
LONG TERM GROSS PROFIT N/A
LONG TERM TURNOVER N/A
TOTAL CHARGES ₹211.82

Also I have salary income above 3lac and below 4.5lac, my main income.

My question is 1) can I simply file ITR2 ? (stock profits as capital gain) , OR I have to make audit for this small income ?
Thanks

Hello sir, one question.
for example I am only doing short term trading only of shares of different companies for entire year. On some I made profits on some losses. do the STGC (15%) is applicable on every trade I made profit on? or i can just use like this “profit – (minus) loss = balanced amount taxed as 15%?

Hi Nithin – I am a Zerodha client, which I use primarily for trading. Additionally, for my long term equity investment, I am subscribed to equity PMS. Can I show PMS fees as expenses (cost of improvement) to reduce my STCG, which have arisen due to PMS selling shares with holding of less than a year.

I want to see all EQ, F&O, Commodity all market transaction or tradebook within single reporting for a whole year eg. from 01.04.2014 to 31.03.2015. How can we find the same? and also the Net Profit/Loss in the same way we require, then how we get the reporting in a single report?

my business income is 3 lacs and i bought shares worth 2lacs of single company,do i need to show shares at the time of purchase in IT return or at the time of sale ,i searched on internet that shares purchase worth 1 lac or more reported to IT dept. and its comes under AIR 005 ,is anything to worry?

Sir I usually trade in commodity,and also get benefit of leverages what should my total sales or total turnover,
For example-i have 5000 rupees, with support of leverages I bought 2 unit of [email protected] and sells them @40500. In these case what is my turnover

Sir,
I and my husband have trading accounts with you
I understand , this is not platform to complain
but, I have no choice to reach you
MY HUSBAND HAS SENT 10 MESSAGES, IN DETAILS
BUT SUPPORT SECTION IS MAINTAINING THAT
ZERODHA LEDGER IS CORRECT
MY HUSBAND IS RETIRED MANAGER OF CANARA BANK
WORKED AS HEAD OF RECONCILIATION

the problem is
my chartered accountant is taking objection
on ledger statement of my husbands trading account with zerodha
which shows 0.01 paisa difference in reconciliation
between your ledger statement of my husband A/C. DG0240
AND
ledger statement as mirror account prepared in TALLY ERP.9
I give here the transaction which Zerodha ledger shows
(DOTS are added to prevent the distortion of message , after posting and made it to remain intact.)
Date……………………………………………………………… Debit……………….. Credit………………………Net
28.02.17 opening Balance …………………………………………………………………………………….660414.31
28.02.17 bening Payment Gateway Charges…………..10.35……………………………………….660403.96
28.02.17 Settlement value for……………………. ….246981.35……………………………………….413422.62
Sir
this the net balance , which zerodha lydger shows as 413422.62
this is wrong sir
THE CORRECT NET BALANCE SHOULD BE 413422.61
Tally EPR.9 Shows the correct balance as 413422.61
my husband asked to support section to contact YOU/CHARTERED ACCOUNTANT
They mantain that they are correct and say they have taken opinion of chartered accountant
and so zerodha ledger is correct
SIR
YOU INTERVENE
OR SUGGEST ME HOW MY HUSBAND SATISFY TO MY CHARTERED ACCOUNTANT
sir
please
help
REGARDS
RENUKA GHANSHAM HARDASANI DR2336
GHANSHAM HARDASANI DG0240

I have heard that there is an Income Slab excessing which a person needs to pay Income Tax. But, If the total Income of a Person including income from the Stock Trading do not cross that Minimum Income Tax Slab, Still Is it Mandatory to Pay Tax? Suppose, the Yearly Income of a person from other sources is Rs. 2 Lakh and the Income from Stock Trading is Rs. 30000 (Yearly) totaling Rs.2,30000 in a Year that is lesser than the Minimum Income Taxation Slab, then Still Is he Required to Pay Tax? Please Reply.

For debt mutual funds ltcg is flat 20% after indexation,,,wheras for stcg its as per tax slab,,,,now if i have no other income,,then reedeming before three years and showing it as stcg is better right,,or is my thinking wrong.

Dear Nithin , I joined Zerodha in Nov 2016. I have made STCG on EQ delivery in 16-17 of about Rs.50000/= with a turnover of about 25 lakh. I am a salaried person in the 20% slab. 1) Is it OK to file my return under ITR2 ? 2) The charges related to Zerodha EQ delivery trading amount to be about Rs.6000/= Can these be used a setoff in ITR2. Thanks

I am a salaried person. This year I have made STCG of 2,46,000 by selling equity shares. Previous year I have carry forwarded the loss of 1,60,000. My salary for this year was 1,91,000. Also I have earned 16,000 from fixed deposit interest. I have certain deductions which I can take such as mediclaim, pf, dividend and saving bank interest. How much is my tax to be paid if any, can you help me on this?

You can set off the loss, so I am guessing you have 85k of STCG. If you add 85k to 191, it is around 2.7lks + 16, Say around 3lks. Apply all your deductions. You have to pay 10% above Rs 2.5lks as taxes after all deductions.

I have a confusion!
If i bought Stock “X” at Rs. 100 on 26 September 2016 and got delivery in DEMAT A/C
on 29 September 2016 Market Started falling after Surgical Strike and i sold stock “X”at 10:20 AM and bought back at 03:20 PM.
With this activity i saved the loss of Rs.20 that i could have suffered but technically it’s shown as “Profit”
After 2 Months i sold Stock “X” at Rs.200
Now it is clear that Rs. 100 (200-100) are STCG
but what about Rs. 20 that i saved on 29 September ?
Will it be Speculative income Despite having Stock in DEMAT?
Do i have to disclose it ?
As it is not real profit it just saving of Loss that could have suffered

I have a SIP from last two years in 3 different MFs however they have never been redeemed or sold and they are in still in continuation. But their current values are higher than the amount invested. Will this qualify as capital gain even if the units are not being sold??

My husband sadly passed away last year. He had invested in some stocks for us in 2 demat accounts –
Account 1 in HDFC was in his name as 1st holder and mine as 2nd holder,
Account 2 in ICICI was in my name as 1st holder and his as 2nd holder.

When I submitted my husband’s death certificate to HDFC and ICICI, they asked me to open new accounts claiming that they cannot just delete my husband’s name (RBI circular says they should be able to just delete the name of the deceased person). Because the banks were not helpful, since last month I have 2 new demat accounts at HDFC and ICICI.

I would like to combine all shares from the 2 accounts into one account at Zerodha to avoid paying their ridiculous brokerage fees (ICICI is charging me 0.75% + other charges on top of that).

However, after reading the FIFO rule for taxation I am concerned about selling any shares. All shares I hold were bought more than 2-3 years ago. So at first glance it looks like selling them should incur no tax. However, if the FIFO rule is for each demat account, does that mean that I cannot sell these shares before the end of 1 year of holding within a demat account?

Example 1 – We bought Reliance Industries 100 shares in 2009. It was in my joint demat account with my husband with him as 1st holder and I was 2nd holder. Since April 15 2017, these 100 shares of RIL were transferred from the closed joint demat account to my single demat account at HDFC. If I sell those shares today in May 2017, is my holding period for long/short term tax treatment considered from 2009 or from April 15 2017? If I create a new Zerodha account and transfer shares to Zerodha on June 1, does this mean that I cannot sell for long-term tax treatment until June 1 2018?

Example 2 – I have L&T 50 shares bought in 2010 in my joint demat account at ICICI with me as 1st holder and my husband as 2nd. Now those 50 L&T shares are in my single demat account at ICICI since April 10 2017. If I sell those 50 L&T shares today, are these long-term or short-term for tax treatment? If I transfer these shares to Zerodha and then sell, do I have to wait for 1 year of holding in Zerodha demat account before selling?

Example 2 above, I presume I can claim that I was the 1st holder of the old demat account, so the purchase date still remains the old purchase date. Example 1 is harder for me to find the right info online about taxation. If I transfer all to Zerodha, how best to sell to avoid paying tax for my shares that were purchased many years ago?

Transferring shares between your own demat account doesn’t change the holding period. For that matter, all transfers between immediate family, husband/wife/children, can be shown as a gift and original holding period will apply.
1. 2009 itself
2. Long term if you sell now, or if you transfer it to Zerodha and sell.
3. No tax implications like I said by transferring to your own demat account. It is like how transferring money between your own bank accounts has no tax implications, similarly if you move stocks between your own demat accounts, has no tax implication.

Wheather a govt employee in india can have investments in equities ? If yes what amount of tax is needed to be paid in LTCG . AND WHERE TO SHOW THE SHARES WHEN HELD IN DEMAT AND WHERE TO SHOW AS INCOME WHEN SOLD?

(1) i have done much losses from 2005 to till date and i am government servant i file IT return every year but not shown losses, if i have to rebeat this losses from new profit can i shown old year losses? or can i file old year return repeat?
(2) if i purchase A company share qty 1000 @ 50 with brokerage of Rs.500 in may.2016 and i sold qty 500 @ 60 in Aug.2016 brokerage of Rs.300 (of 500 qty) when STCG counting brokerage of purchase side i have to count Rs.500/- or per unit findout brokerage and findout (500 qty) brokerage…… i mean i shown purchase side brokerage rs.250/- and when sell remaining 500/- qty then shown purchase side brokerage rs.250/- or total Rs.500/- on first time sell partly qty………please guide me thanks

I was trying cleartax.in to submit details of my capital gain/loss ( I use Zerodha ). Do we have to mention purchase/sell date & price of each & every share ( for short term capital gain/loss) ? Or in actual ITR2 form (Java tool or Excel version) we’ve option to enter consolidated short term capital gain/loss(Already calculated by q.zerodha in P&L section) somewhere ?

I have an existing computers business for which I file my itr under section 44 ad but fro time to time I also buy F&O. In this financial year, my total sum for options traded was 35 lakh but overall I had a loss of 1.5 lakh. Is it compulsory to show this turnover or can I consider myself as an investor as I really don’t want to audit the books and also do not want to increase turnover of my existing business.

Sir,
As I have salary income and Equity related capital gains, I have been filing ITR-2 returns till last financial year .
1) Is it the same ITR-2 to be filled on revised ITR forms for AY 2017-18 ?.
2) I have done gift transfer of shares worth 2 laks to my spouse account. Where this need to be shown in my ITR-2 ?.

Thanks for prompt reply. I have gone through your article. It is really excellent. And top of that your way / method/ process of explanation. Fantastic.
My requirement is for filing return – acquisition/ full consideration value is asked.
Suppose I bought shares worth 10 lakhs and sold the same at 11 lakhs.
What will be acquisition/ full consideration value for LTCG. This fields are required to be filled in IT return.

i am a retired govt employee ,i had pension income, and now i am doing private job right now. I do intraday and delivery based in equities in my Demat account,i had opened account on my wife name in Zerodha and all the documents what i had submitted on her name only and she is a house wife.I do trading in zerodha too.can u pls tell me what ever the profit iam getting in my wife demat is taxable in my name or my wife name whether it is intraday or delivery based.

Hi Nithin,
I have F&O Turnover of Rs. 1000000 (ten lakh), but made a loss of Rs. 100000 (one lakh).
I am salaried in 30% IT bracket, have other capital gains.
As I understand I need to get Audit done (because F&O turnover <2cr AND profit < 8% of turnover), and file ITR3.

Can I avoid Audit by claiming (even when I have loss in reality) that I made a profit of Rs 80000 (8% of turnover), and paying a tax of Rs 24000 (30% of 80000) ? I am anyway paying more tax than required??
If yes, can I do this by putting below entries in ITR3?
1) Part A-Gen: Audit Information a) Are you liable to maintain accounts as per section 44AA = No
2) Part A-Gen: Audit Information b) Are you liable to maintain accounts as per section 44AB = No
3) Part A P&L: item 53b: Gross Profit=80000
Thanks

Hi Nithin, its about 8% factor for audit or no audit.
How to check profitability of 8%?
Is this gross profit divide by turnover OR net profit (after deducting cost including STT)?
In this year’s tax PnL it shows me 3k profit, 11k cost and turnover of 33k. So gross profit is 3k but after deducting cost net is loss of 8k.

my wife is a house maker and she do trading in zerodha which is on her name,if the profit is less than 2.5 lkh,is it mandatory to pay tax, and to declare the income.Trading is the only income for her.The money what she is using for trading is mine.

Sir iam going to gift my wife a amount 20 lakhs which i got as long term capital gains and that was reflected in income tax returns too in the last financial year.
1.Is there is any limitations of amount to gift wife…
2.She is a house wife ,she use to trade in zerodha,If she invests that amount in shares ,the profit what ever she is getting is getting clubbed with my earnings or on her name ,let it be STCG or LTCG.

I have income of Rs 493000/- from salary and i have Short term capital gain from shares (STT Paid) of Rs 16000/-. Further I have long term capital loss of Rs 28000/-. What is my Income tax payable. In earlier years i had short term capital loss also. Can it be carried forward now.

Is there is any procedure to gift money to wife OR parents…or directly we can transfer to their bank accounts(amount is 20 lkhs each ).I heard that bank will intimate income tax authorities for a amount more than 10lkhs deposition in a account in a year. is there is any problem for transferring that much of amount.

You can directly transfer. But make sure to show it while filing your returns. Banks might have an alert in place for higher value transaction. But that is okay, as long as your are showing this transaction in your ITR.

I have a joint demat account with my brother (I am the first holder). All the investments in the demat account have been done by me and paid for by me. Can I remove my brother’s name as the second holder and replace it with my sister’s? What would be the procedure for this?

I made loss, intraday=2000.00 ,short term capital loss=38000.00 in financial year 2013-2014. i didnt declare these losses in my itr1 at that time. now1) can I revise the itr, if so which form to be used.2) I made intraday loss=12000.00, stcg=22000.00 in fy2016-2017. which form to be used for filling itr. And can I adjust the stcg losses occurred in 2013-2014, with profit of 2016-2017

Suppose I bought 100 shares of company XYZ on 01-08-2016 @RS. 200/share. Company demerged into XYZ and ABC in the ratio of 1:1. I received 100 shares of ABC in my demat a/c on 21-07-2017 but trading of ABC started on 02-08-2017. I sold 50 shares of XYZ on 15-07-2017 @Rs. 80/share and remaining 50 shares on 05-08-2017 @Rs. 70/share. I also sold all the 100 shares of ABC on 10-08-2017 @Rs. 150/share.
Now while calculating STCG and LTCG
1. What will be my buying cost for the shares of XYZ sold on 15-07-2017 and 05-08-2017?
2. What will be my buying date and cost for ABC?
3. What will be my STCG and LTCG?
4. Will there be same tax treatment in case of Bonus shares in 1:1 ratio instead of demerger?

1. When company demerges the company also give a % value being demerged from the main company. So if it is 30%, you can mark 30% of your cost of buying company XYZ to Company ABC. ALso drop the main company cost to 70%.
2. Buying date for ABC will be that of XYZ itself.
3. Everything will be based on when you bought the main XYZ.
4. In bonus, the new shares you get comes at 0 cost. Here it comes with a cost, so treatment slightly different.

1) Can a person be a investor and trader at the same time?
So is there is any advantage in maintaining two trading accounts-
(a) one for investment
(b) one for trading

2) Does all tax accrue to the person in whose name the trading account stands in case he has multiple demat accounts in various combinations but in all such accounts he is first holder?
I know zerodha permits only one demat account to be linked but ICICI/HDFC among others allow linking upto 5 demat accounts.

3) With respect to point 2 above, isn’t the first account holder in joint demat the primary custodian of shares just as in case of savings a/c and MF holdings.

Great job You have made many things easier. Just a small confusion. I have Intra day trades and short term trades in equity. The frequency of short term trades is low as I am a Salaried person. So can I show the short term trades as STCG and the Intra-day trades as speculative business income? Or do I need to show both Short term trades and Intra-day as Business income ?

Even if a person does 1 or 2 intra-day trading the entire year, still does he need to show the income under speculative business and file ITR3/4?

The reason for the above question: I am a novice investor who has so far filed ITR2. I just wanted to try out trading for a few days. If it doesn’t work out I will do more deep dive and try again next year.

Ok thanks. I searched for liability for audit. So if turnover is more than 1 Crore then audit is necessary. By turnover in terms of trading means the total transaction amount right? Like if I have bought shares for 50 L and sold all of those for say 60L then total turnover is 110L(50+60)? Or is the turnover 60L(max(buy,sell)) or 10L(profit/loss)? Which is turnover?

i think he is right…i don’t know for sure though..
under presumptive tax scheme…if our turnover is less than 2 crores and profit is more than 8% of turnover then we don’t need to audit our book at all…correct me if i’m wrong….

Hi Nithin
I am a state govt employee with annual income of rs.480000. I am very much interested to invest in stock market but i have certain confusion. Please clear all my confusion and my queries are:

1- Can i invest in stock market being a govt employee?
2- Suppose i buy some shares today and after getting delivery sell them after 7-10 days. Can i repeatedly do the same transaction in a month?
3- Which itr form should be used?

Dear sir,
can we get the details of brokerage and other charges in trade book option or anywhere else where we can track it on each transaction basis. right now it is shown clubbed on day basis.
Thank you very much.

Really its a great work from Zerodha, to help everyone even in Taxation level and also other queries from different topics. Congrats for this great Initiative.. I am using Zerodha for last 6 years and had good experience till now. Can you please clarify the few queries which I have for a long time..

1. If my annual income is Rs 6L and the amount invested in share market is 4L for long term(delivery), should I need to provide the amount details invested in shares during IT filing. If so, How to do it?
2. In case 4L is mentioned in IT Filing, will tax be calculated for 6L alone or for 10L(6L+4L) if I am investing for long term. ?
3. If I mention 4L in IT filing, will it benefit me to reduce tax or will it increase my total tax to be paid.??
3. I buy shares on a monthly basis regularly. In that case, if I sell shares after few months, will the shares bought first a year before will considered for tax calculation or is there any order?

I have inherited some shares, which were bought more than 25 years ago. The shares were bought on prominent exchanges – BSE and NSE in india and held in demat form. If i sell now, what are the tax implications. I do not have any idea of the buying price…

My self salaRied person with additional business of technical consultancy
Now started investing in equity and mutual funds
Which it should I file
Up to now I used to file itr 4s which is now itr 4
As I disclose consultancy income by rule of 44 Ad

Hi
I am an NRI and my wife is resident Indian (for taxation).
i transfer money from my NRE account to her resident account and he invest in mutual fund through COIN for long term. ( rs 30000 per month).
she dont have any other income in India and will be doing mutual funds only ( no intraday or equity)

my questions are
1) does she need to submit ITR .coin investments made are for long term gains only

2) I am submitting ITR for my investments.so will i need to include what i gift her.i read about clubbing with my earnings.ca you explain

If my profit from Trading (Spec/Non-Spec Business) is less than 8% (or Loss), do I need to get an Audit even if I have profit from Investing activities/other Income & thus in total I have profits more than 8%.

Will the sale amount from Investing activity will be taken into consideration for T.O. for Audit ?

Dear Nitin, i had a demat account in sharekhan and i want to open another demat in zerodha.what i want to know is
1. Can a person eligible for multiple demat accounts?
2.my name in bank is B.L.N.Prasad and rest all other (Pan,Aadhar) is in elaborated form,can i open a account in this conditions with out any problem in future for transfers.
3.so my cheque book had also short form of my name,or else i had to change my name in bank records as per Pan card.

Dear Sir,
As I got a good response from Equity Market( fully thanks to you), I am planning to Redeem my Mutual Fund and invest in equity directly.
1. Since last 10 years I am regularly investing in the MF through SIP & lumpsum and I have not shown my investment while filing my previous income tax return.
2. Since my all investment is long term and does not attract any type of capital tax gain
3. Suppose I redeem my investment of MF and investment in the direct equity.
4. Do I have to show redeem amount from MF & fresh investment of direct equity in my future income tax return filling. i.e(2017-18)

I majorly do investment activity. Only once I did intraday trading ending up in loss of around Rs.12. I didn’t intend to do intraday or F&O in future. Can I declare myself as Investor and submit ITR2 or do I need to consider myself as Trader here?

Hi Nithin, it is a great article and most valuable one. I just would like to ask one thing that if I don’t have any business related expenses then turn over or revenue earn from Intraday or FnO, itself is profit to be taxed according to respective tax slabe

I have joint bank and joint demat account with my parents.
In both accounts I am the first holder. The trading account is in my name.

Recently, my mother transferred some money from her (another) account by ERROR into my account.
1) How to show the above transfer in my return?
2) How to calculate the capital gains in such case? Would it accrue to me only or equally among all demat holders?

Suppose
I sold some shares of reliance for profit of Rs 2200 and I also sold some share of Tata at a loss of Rs 500, under STCG then on what a amount I will have to pay tax on Gross profit of Rs 2200 or on net profit of Rs. 1700.

1. I have read in other sources that advance tax is payable if calculated tax liability exceeds Rs10,000. There was no mention of this threshold in this chapter so I wanted to confirm this. Do I have to pay advance tax is my tax liability on realized profit is less than Rs 10,000?

2. And what happens if I realize a very big profit in March which I couldn’t anticipate now? Will I be penalized for this?

And how do I calculate and pay this interest? I mean I can calculate and pay Advance tax myself through Challan. But will the IT department contact me somehow to tell that I have to pay this much interest or that is also my responsibility?

Hi Nithin, its about the bonus share taxation. I had 20 RIL share ( buy at 1500) before declaration of bonus share. And after adding 1:1 bonus share I had 40 total. I sold all together at 800. Can you please suggest how to consider these for STCG?

The first 20 shares you would have short term losses (1500 -800). IN the new 20 bonus shares you will have short term gain (0 -800). So net gain of 100 x 20 = 2000. On this Rs 2000 you pay 15% as STCG.

I got an another doubt after going through this chapter. Basically, I had some gain (20000) from delivery and some losses (-40000) from intraday. Initially for 1-2 month, I was doing trading seriously and later its occasionally due to some personal reasons.

My doubt is,
1. can I accumulated show net losses (-20000) as short term capital loss?
2. Since I was in assumption thay intraday loss can be setoff against STCG, I haven’t paid advance tax for last quarter, will this attract penalty?

There are other income mainly from interest of savings account, FD and EPF withdraw (assuming I’ll receive last before 31 Mar, its taxable due to less than 5 yr service).

1. No, intraday is speculative business and delivery can be shown either as STCG or non-speculative business income. You can’t net this off.
2. hmm.. I think you can handle this without any penalty. Do speak to your CA.

Pardon, based on clarification, If the bonus is declared after 1 yr, so the initial 20 shares will be having Long term capital loss, while the bonus 20 shares shall be having STGC. Dose that mean I have to pay 15% on 20×800= 16000? Is my understanding is correct?

Thanks Nithin for prompt reply.
With this, I really got a lesson that if a stock is held for more than a year and if any bonus is about to declare, better sell before bonus declaration to avoid paying higher tax. For above example, tax is 2560 while if sold before its zero 0 with little chance of reduced gain.

Hi
1. Does new bonus shares also attracts STCG if its sold before 12 months of bonus shares allotted date ?
2. If you have STCG and still your income is less than 2.5 lakhs. Still we need to pay taxes on STCG or its exempt?
3. In such scenario in para 2 still should we need to file ITR if our total income including STCG is less than 2.5 lakhs

Hi Nithin
I have an individual account with Zerodha. Now I want to start a joint account with a friend and he will be the first holder. He will invest the money and I will handle the account and we plan to share the profit.
1) Can we share the profit directly from zerodha account to both of our bank accounts or do we need to transfer the profit to the first holder’s bank account and then transfer to my bank account?
2) If we sell the shares after 365 days and we share the profit, do I need to pay any tax?
3) If we sell the shares in joint demat account before 365 days , how much tax do we have to pay?

In my opinion, the sale proceeds could be transferred to the linked/designated bank account only as per the contract signed by you. From there, you may distribute the funds according to your convenience. For IT purpose, the profit may be shared in proportion to the contribution/investment.

A trading account can’t be joint account. Only the demat account where the stocks sit can be joint.
1. Money always has to go back to the trading account holder.
2. If you take money, for you it will be a normal income. So no LTCG benefits.
3. 15% is the STCG.

“2. If you take money, for you it will be a normal income. So no LTCG benefits.”

A.) If we start joint demat account and our joint bank account is linked with the trading account, then both of us will get LTCG benefits or only for the trading account holder ?
B.) Is there any way for both of us to get LTCG benefits ?

1. Like I said earlier, trading account can only be individual. Only the trading account holder can take benefit.
2. You can create a partnership business, put money in the partnership and invest through that entity.

Hi Nithin
I have an individual account with Zerodha. Now I want to start a joint account with a friend and he will be the first holder. He will invest the money and I will handle the account and we plan to share the profit.
1) Can we share the profit directly from zerodha account to both of our bank accounts or do we need to transfer the profit to the first holder’s bank account and then transfer to my bank account?
2) If we sell the shares after 365 days and we share the profit, do I need to pay any tax?
3) If we sell the shares in joint demat account before 365 days , how much tax do we have to pay?

Dear Nithin,
I understand that the dividends earned from equity and MFs are not taxed at investors hand. However I am confused whether the dividends earned within one year of investment either in equity or MF or ELSS are also not taxable at the investors hand. Please clarify.
Regards,
Sharanu

If there is no issue of liquidity then BTS Tomorrow or BTS day after tomorrow will be considered as delivery trades and not as intra day right? Moreover since we did not actually take delivery the charges will be less than delivery trades right(since DP charges are avoided)? Or are there any other charges with respect to BTSTomorrow? Moreover will BTSTomorrow(Assume I have only very few BTSTomorrow) come under short term capital gains(ITR 2) or Speculative Business income(ITR 3)?

BTST is capital gains or speculative is a grey area, I don’t know what is the correct answer. I think if not too many such trades show as capital gains, and if many then speculative. Yeah no DP charges on BTST.

I have bought shares on delivery and shorted in equal quantities in future. Profit in delivery and loss in future. What will be the tax treatment. Will it be taxed on arbitrage profit or treated as STCG and loss in future. Thanks

Dear Sir,
I am planning to migrate USA for employment purpose.
I also wanted to invest money in Indian share market (Delivery based only) directly for long time.
I have two questions:
1) Will my Indian share related income be taxable in USA as I heard that USA takes tax on global income ? How much true is it ?

2) If I want to open trading account repatriable/non-repatriable basis in zerodha, which bank will be suitable by considering the cost involved.

Pre-demerger cost of acquisition of Orient Paper and Industries Limited (OPIL) shares in the following manner.

Orient Paper and Industries Limited (OPIL) 60.77% + Orient Electric Limited 39.23%.
If you invested Rs. 100 in OPIL after the demerger your new average price for OPIL will be 60.77 and new stock Orient Electric Limited average price 39.23.

Surcharge is on tax amount which is calculated on basis of gross total income. In your case there won’t be any surcharge as your gross total income will be less than 50lks (LTCG won’t add to your total income)

With recent development in Budget and LTCG for equity in place now, I would like to know how to calculate cost of acquisition for shares, earlier i never used to worry and used to add all expenses (STT, Stamp duty, Brokerage etc) since i am long term investor and generally sell only after a year.

Sir,
My query is related to Use F&O to hedge my long-term Shares Holdings that I
Treat LTCG.
I Short Futures far month & carry it later
Now I having negligible profit in that account.
Should I have to fill ITR-4 for that
And I have to take care of turnover for audit.
Or there is anyway to avoid filing ITR-4.
I am Govt.Employee, that’s why I am concern about that

Hi Nithin, I have intraday losses, position based gain and MF losses this year.

1) As you have mentioned earlier in reply to my query, I can show the position based gain as non-speculative business income, in that case can I show STT also as a cost? (Since I have traded intraday, I have to anyway file ITR 4)

2) I have another doubt, can I adjust the MF losses against position based gain (considering 1) above).

3) what about the exit load, MF company charges on exit before predefined duration? Will that be a cost for tax consideration?

I understand that I can show the position based gain in 2 ways,
1) as capital gain, so I can adjust those against MF losses. Here, I can’t claim STT as cost.
2) as non-speculative business income and can reduce the STT from gain as cost. Here, I can’t offset the MF loss against this gain.

Can you please explain your reply?
I don’t understand the math.
1. If LTCG exceed 1 Lakh then we do have to pay 10% only if total income is greater than 2.5lkhs?
But,
2. If total income doesn’t exceed 2.5lkh and if LTCG exceed 1lkh we don’t need to pay?

Both wrong. If your total income from LTCG is assume 1.5lks. 1lk is exempt. So the remaining 50k gets added to your other income and you pay taxes. If your total income (50k + everything else) is below 2.5lks, there is no tax to pay.

I am getting monthly dividend from HDFC Prudence Fund. My question is whether the dividend received by me is considered short term gain (stg) for taxation or long term gain. If it is considered s t g then the amount of tax should be paid by me or by the HDFC MF HOUSE. Pls clear it.

1. My investment+expanses exceed 2.5L but less than 2.8L in FY 17-18. Am I taxable ?
2. I Should Fill ITR ? income tax deptt will ask for source of money ?
3. I am Unemployed Invested Amount Got From Parents in Installments.

1. Only if your income is more than 2.5lks net, you need to pay taxes.
2. Yeah, best to file ITR. Not mandatory if you haven’t earned anything.
3. You can show the money as gift from parents. It is not taxable.

I have capital gain of Rs.1.75 L this year on an investment of Rs. 20 L. On the paper the unrealized loss is 4 lac.The actual value of my stocks now is only 16 L as all my 15 stocks are in the red from Jan18.Can I sell some of these loss making stocks to the tune of Rs. 1.75 L by march end and buy the same or other stocks in the first week of April18. Does it make sense to avoid capital gains tax this way.

As discussed in Budget 2018 and the recent passing of the Finance Bill in 2018, LTCG will be taxed at 10%.
Can you please tell us the impact of the same? And whether loss in LTCG can now be used to offset LTCG/STCG profits?

1. I have Intraday profit of 15000
2. Short term capital gain of 4 Lakh
3. I have income from FDs interest.
4. I dont have any other income other than above. Which ITR to be filled? Is it okay to fill ITR2?
5. From your article, got to know that for Intraday profit need to fill ITR4. But is it okay to club Intraday profit with Short term capital gain and show it as a Short term capital gain and use ITR2?
6. And how much I have to pay as tax. as of as my understanding
First 2.5L no tax + 1.5L PPF i will show under 80C
Should I pay only for 15000 profit as tax?

Thanks Nitin, Few more queries:
1) But, I read it as 80C deduction is not applicable for Short term gain. Is it so and in that will I get a benefit of only 2.5L slab and remaining 1.5L also I have to pay flat 15% asit is short term capital gan comes under 111A?

I am an NRI and my wife is resident Indian (for taxation).She is a house wife , she invests about 10 lakh in FY17-18 in equity shares through zerodha. She dont have any other income in India.
The money what she is using for investment is mine (transferred from my NRE account to her resident account).

my questions are
1) Do she need to pay any tax for this FY. ( Only investment has been done this year, No Profit booking)
2) does she need to submit ITR? (If yes, please explain briefly )

1. Do IT dept send notice to all who are involved/active in Share market or mainly to those who do intraday n short term trading?
2. What are the benefits in filing ITR if we don,t have any taxable income in the FY. (if any).

Suppose, if I showed a loss of 2 Lakh in previous year and it is carry forwarded to this year and this year if i show a profit of 2.5Lakh profit.

1) In this case, can I carry forward the previous year loss to next year and show this year profit as it is? As anyways for this year proft is 2.5L and I dont have to pay tax as it is below 2.5L slab.
2) In that way Can i carry forward last year loss to next year without adjusting it for this year profit.

My son has recently turned major. Can I use this opportunity to Gift some of my stocks and shares to him to reduce my tax outgo. He has a PAN and demat a/c; and does not have any other source of income.

Yep, on the face of it looks like it gives an opportunity. But section 94 remains the same for bonus stripping (if being done to claim losses)

(7) Where—
(a) any person buys or acquires any securities or unit within a period of three months prior to the record date;
(b) such person sells or transfers—
(i) such securities within a period of three months after such date; or
(ii) such unit within a period of nine months after such date;
(c) the dividend or income on such securities or unit received or receivable by such person is exempt,
then, the loss, if any, arising to him on account of such purchase and sale of securities or unit, to the extent such loss does not exceed the amount of dividend or income received or receivable on such securities or unit, shall be ignored for the purposes of computing his income chargeable to tax.
(8) Where—
(a) any person buys or acquires any units within a period of three months prior to the record date;
(b) such person is allotted additional units without any payment on the basis of holding of such units on such date;
(c) such person sells or transfers all or any of the units referred to in clause (a) within a period of nine months after such date, while continuing to hold all or any of the additional units referred to in clause (b),
then, the loss, if any, arising to him on account of such purchase and sale of all or any of such units shall be ignored for the purposes of computing his income chargeable to tax and notwithstanding anything contained in any other provision of this Act, the amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of such additional units referred to in clause (b) as are held by him on the date of such sale or transfer.

Hi Nithin,
I have NRE Dmat account. They deducted 90000 INR (simplified figure) STCG on a transaction with profit of 6 lakhs. I made loss of 2.5 lakh in same FY in another transaction. I understand, i need to pay STCG only on 3.5 lakhs now.
1) Can i claim refund for additional STCG (paid on 2.5 lakh extra) in first transaction?
2) While filling ITR, do i need to consider straight 15% tax or should add as normal income?
3) Which ITR to file?
Thanks

I have a loss of Rs. 5 lakhs carried forward from Fy 2016-17. i have a profit of 4 lakhs for Fy 2017-18. I understand the offsetting and carry forward a loss of 1 lakh and no tax payable for Fy 2017-18. My turnover is less than 2 crores and profit of 4 lakhs is less than 8%. Would i require audit since i have no tax to be paid. No other source of income. Pls advice. Thanks.

hi nithin, i am a zerodha client since last april to till now, i have made some gains over short term delivery trades and made some losses in intraday. Overall i incurred profits from delivery trades and losses from intraday trades, my total profit is less than 10k. I don’t have any other income as i am learning stock market trading only, for this i borrowed some money (36k) from my father, i have not registered on income tax department yet. Plz tell me what is my tax liability or whether i can continue trading without tax filling yet.

Kindly help my curiosity. If I have credited 1,00,000/- to my zerodha account and I have invested all of it in some stock @100/- (i.e. 1000 shares). Now stock is @120 and I have sold 500 shares. So amount Invested in shares is 60000/- and 60000/- is a free cash available. I have reinvested this 60000/- amount in another stock instead of redeeming into my bank account. Do I have to pay tax on 10000/- profit that I made by selling 500 shares?

First of all, it’s really good to see a CEO replying to customer comments frequently (We never see this for other organizations)!
I have 2 questions:

1. An STCG can be taken as Speculative Business income or non-speculative?
2. A stock if bought in March 2017, and sold in April 2018, at profit, that would be considered for tax calculation for which FY? 2017 or 2018?

Hi,
“When calculating taxes on capital gains, STT can’t be added to the cost of acquisition or sale of shares/stocks/equity.”
Does this mean that STCG and LTCG tax is applicable on ( net Profit + STT ) ?

I paid Rs 50000 brokerage for 1 Year for trading upto Rs 100000 and part of 1 year period falls in different assessment years. Now I have various options to calculate Capital gain using Rs 50000 brokerage i.e.

1. I can deduct whole Rs 50000 in the year when tax amount is more.
2. I can calculate a weighted average rate of brokerage and deduct it from sale proceeds using that rate
3. I can deduct Rs 25000 in one year and Rs 25000 in second year.

Please suggest what is the correct treatment as per Income Tax Act for deduction of Brokrage amount from sale proceeds.

Hi Nithin,
My F&O turnover in FY 2017-18 is Rs 38000 and Loss Rs 33000. I am in tax bracket of 5% on income from FDs. Besides there is STCG of Rs 24000 also. Whether audit is required in this case? If so, being an investor can I show 8% profit in F&O instead of loss to get away with audit. Or Is it better to ignore the loss as i don’t want to make good or carry forward. Which ITR to use in each scenario. Please advise.
I am a regular follower of your interactions with investors and the responses are wonderful and catchy.
Thanks a lot.

I am in 5% bracket,age less than 60 and have FD income of 2,60,000. In addition to this I have income of Rs 3,00,000 from shares STGC under 111A. For income above Rs 2, 60,000 can I calculate tax at normal rate of 5% instead of STGC rate of 15%. Please advise. Regads

Suppose I have bought 50 shares @ Rs. 150 of company A and 20 shares @ Rs. 100 of B in FY 2018-19. I have not sold any share so far as I intend to hold them for long term (>1 year).
As I have invested total Rs. 9500 (7500+2000) during FY 18-19, do I need to show this investment in ITR-2 of AY 19-20 ??
Or Do I need NOT show it at all as there will be no capital gain/loss during holding period?
Please also tell me, being a salaried person, can I file ITR-1 during AY 19-20, as I have been filing so far till AY 18-19 OR do I need to file ITR-2 even though there will be no capital gain (holding period > 1 year) during FY 18-19?

First off, great article man. I have been struggling for a few years now to understand exactly the various scenarios and calculations in regards to my tax liability. This article has cleared out quite a bit of the fog in my mind.

Now to my question, I have invested in a tax saving Mutual Fund during FY 18-19 (locked in for 3 years). Do I have to declare any gain the MF makes, in my declaration for AY 19-20, then again for the next two AYs; thereby paying (or not paying) the applicable tax for the individual year gains, OR can I declare the total gain I realize at the maturity of the MF, and declare in the third AY only, and pay the applicable tax for the LTCG.

Sir, i have income from Salary, and also from Long term capital gains( stocks), short term capital gains( stocks), intraday (stocks) and also derivatives( stock futures). which ITR to be used for income tax filing and where should i mention my intraday (stocks) and also derivatives( stock futures) income?

Sir, Is indexation used only while calculating capital gains in case of non-equity oriented mutual funds, property, gold, and others where we are taxed on LTCG,
OR
Is indexation be used for equities and EOMF also?
(Income tax tutorial seems to suggest otherwise)

Some of the stocks that I hold were credited via ESOPs from my company (and hence there was no buy price against these in my previous demat account). Since I transferred them to Zerodha now, now there is no buy price reflecting in Zerodha too.

1. How do I add the price manually in Zerodha for such transaction, so that I get correct P&L at the end of the year from zerodha.
2. How do I add other on-market transactions of my stocks (date of purchase, buy price), so that zerodha is able to calculate P&L at the end of the year via FIFO?

1. We are maybe the only broker who allow you to enter discrepant quantities with price/date. The old version of Q has some issues with this feature, if you can give us a few more days, https://console.zerodha.net/dashboard/ will go to beta. You can check the holdings page and P&L page here.
2. On market transactions are automatically added on P&L and FIFO is applied to generate P&L. Old reporting tool: q.zerodha.com, new reporting tool in pre alpha https://console.zerodha.net/dashboard/

hi Nithin,
You are doing great. hats of for your efforts.
I have a question. I have opened demat account with zerodha in the name of my wife. I am already having demat account with SBI in my name. Now i wanted to know whether i can transfer my equity shares held in sbi demat with my PAN to zerodha demat with my Wife’s PAN.
plz advice..

SBI would have given you DIS slips (similar to cheque book for your bank account) that allows you to transfer shares from your demat to other. On that DIS slip, mention the stocks you want to transfer, your wife’s demat account details with us, submit that DIS slip back to SBI. Stocks should show up in her Zerodha demat within 1 day of SBI processing it.

I have zerodha account with my wife’s PAN. I have around Rs 70000 loss including equity, intraday and options trades in the last financial year.
She has no other income . So does she need to fill ITR and if yes which form to fill and finally does she need to perform audit for her trades as your her profit is less than 6% .

Hi,
I had made 2000 rupees profit by buying and selling shares delivery based in last FY all sales are short term only before 6 months holding period. I am in 5% tax slab as I had salary income more than 3.5lacs as main source of income. Now my question is I can declare the 2k as either income from other source and pay 5% or 2k as short term and pay 15% am I correct? Note this is my first instance in share market.
Now in this FY I did some intraday lost some 20K and made some delivery trading gained 5K. If in last I showed my short term as other income and paid 5% this 20k loss + 5k profit =-15k loss can show this loss as I did not changed my stance.please suggest
One more thing if I got some 50k in coming years as long term gain for holding greater than 1 yr can I get that ltcg expectation if same rule applicable in that year also or I need to pay 50K * curent tax slab may be 15 or 30 at the time as salary may increase

even if u declare income as short term, you get ur slab benefit. U get to pay only 5%.
Intraday loss can’t be setoff against capital gain income. You have to declare the loss and carry forward. You can set it off to future profits.
If you show as long term capital gain, yes, you don’t have to pay tax.

thank you nithin, but for short term it will be 15% TAX na.
if any intraday profit suppose i made 1300 profit after adding all losses and profit but others charges (brokerage,STT, …etc) are summed upto 1K. i made only 300 so i just add 300 as other income and 5K as short term. i will pay tax for additional 5.3K as per slab (5k short term+0.3 intraday).

Have few queries. Kindly please see if you can address:
1. Say my income is more than 10L and I am under 30% tax slab. Now, say my LTCG is 5L, After the 1L tax exemption, the tax for the remaining 4L needs to be at 10% 0f 4L or 30% of 4L?
2. I work for a MNC and my company gives shares (via e-trade) annually (actually bi-annually) through Bonuses & ESPP. At the time of issuing the shares, 30% tax amount is deducted on those. Those shares are listed only in the US and not listed in Indian Stock Exchanges. Have been holding on to these shares for more than a few years now. Say, if I have to sell all of them now, how will it be taxed? How is LTCG and STCG calculated for these? I get dividend also from these stocks which are still in US e-trade account. And which ITR should be used. ITR-2?
3. Now, consider that the amount received by selling all these shares is re-invested in buying a house in the same financial year. Should I still need to pay taxes (for the shares)?

1. 10% of 4L (if Indian listed company)
2. I am guessing shares are part of your compensation and taxes already paid for it and part of Form 16. The gross amount on which taxes is already paid is the cost of your shares. LTCG will be if you held for 3 years otherwise STCG. Dividend is taxable in India, so you need to add it to your other income here. LTCG for you (foreign listed stock) would be 20% with indexation benefit, STCG would be as per your income tax slab.
3. You can take this benefit and not pay taxes, but provided you don’t have more than one residential house.

1)sir if I buy 10 lot of usdinr future @68.05 and sell it on 69 and made the profit of 5000 the total turnover is 5000 right not 1370000 and I need to pay tax for 5000 right.?
2)In currency ow exactly total turnover is calculated?

I’m a Zerodha customer for about a year now and very satisfied with services. Thank for this detailed chapter and the Q&A platform; it is highly informative.

In your chapter you have already clarified that while calculating taxes on capital gains, except STT, all other charges like exchange charges, SEBI charges, stamp duty, GST taxes can be added to the cost of share.

What about Zerodha annual AMC charges (Rs. 300 + GST) and DP Charges (Rs. 13.5 + GST / scrip sold)? Can they also be deducted while calculating taxes on STCG?

as per your statement we may add DP charges as a expenses then,
why all DP charges paid in a financial year not showing in Zerodha P&L statement.
I want to get more clarification while filling ITR2 in STCG as a investor not business:
Can we add Total Charges including STT+AMC charges+DP charges in section “Expenditure wholly and exclusively in connection with transfer”

I have received some shares from my nephew thro OFF market on 15-09-2004 for consideration at the prevailing market price (STT was not in vogue).The same were sold on 05-06-2017 by paying STT. What are the tax implications.

Dear Sir,
1) I have Form16(salary), STCG(delivery), FO(derivative) and Speculative gains (equity intraday). So what kind of form is applicable?
2) I have 2 demat accounts, one with HDFCSec and other with Zerodha. I have gains in HDFCSec but loss in Zerodha account (eq intraday and FO Derivative). Can I consolidate gains and loss of both demat accounts?
3) Does FO Derivative loss or gain counted as STCG?

Hi, In the ITR2, there is a section to enter the LTCG figures. How do we ensure it is not taxed since the sales were made before Feb 1st 2018 ? There is no place to mention the amount as being taxed at 0%

sir, in terms of stcg from delivery only… i am salaried…
filing itr 2…please clarify the following:
stt is levied every time we purchase and sell but it is not deductible on either side while computing stcg;
so
1. full value under consideration is = sale value – all expenses like service tax ,gst, turnover charges etc,. without stt.
2. cost of acquisition =all the above expences when purchased +and purchase value excluding stt when purchase done.
3. expenditure on transfer/ sale = all above expenses when sale done, exclusive of stt…??
please answer ….

If you are trading at Zerodha, brokerage is 0, so that is not something you need to be bothered about. But yeah, trade wise charges isn’t available. Our new reporting platform will have it, hopefully will be launched in next 4 weeks.

Margin fund would be anyways shown as bank transfer. So yeah you will declare the money lying with the broker I guess. The investments you do are capital gains, no need to calculate turnover on that. Do go through all chapters.

As per my knowledge and from trade details from back office,
1. I bought 100000 shares of A for the first time @ Rs. 0.10 on 20/01/2016.
2. Afterwards I only bought different numbers of shares at different times and prices but never sold any.
3. I sold ,this scrip, for the first time on 12/06/2017, same 100000 shares @rs. O.13.
So to calculate profit/loss/gains from this sale, I reckon you follow “first in – first out” policy (if not, please let me know….) the profit must be the difference of rs. 13000 and 10000 that is rs.3000 and that too is a long term profit/gain.
Is my comprehension right ?
Or otherwise if one has to averages out the purchases before the sale then also profit/loss would differ.

I have a long-term capital gain of Rs. 139672. Is it okay if I add this as ‘Long-term capital gains from transactions on which Securities Transaction Tax is paid’ Under ‘Schedule EI’ in ITR 3? is this STT paid?

I want to know about short term capital gain. I have done trade short term and invest in share also trade in future and option. i calculated turnover 60lakh. Buy Value of all the share in cash and future is 10 crore and Sell value is 9 crore 99 lakh 70 thosand. that mean 30000 rs loss in current financial year. my question is if i fill ITR form 2 there should write acquisition (Buy value 10 crore) total sell value 9 crore 99 lakh 70 thosand. if i wrote this type it show my turnover nearly 20 crore. but actual turnover is 60 lakh. can i write sell value as 60 lakh (turover) or buy value minus loss of 30000. that mean buy value is 59 lakh 70 thousand. so which one is correct form for ITR-2 FORM fillling please guide me. when should i mention Turnover detail in ITR-2.

I sold shares(bought 3 years back) on 28th of Mar2018 but I received the funds only 2nd April 2018
Should LTCG TAX be reflected in FY 2017-18 or FY 2018-19
Is LTCG based on FY of transaction or the FY in whichthe bank receives the sale proceeds
Kindly clarify

Hi Nithin,
My wife plan to start Intraday and deliver thru zoredha end of this month . If she getting profit, in short duration (less than one year), how will be her taxation, either 15% or as per tax slab?

Sir,
I am zerodha member since 2015,i filed my itr for FY 2015/16 after getting audit,I did incurred losses in delivery as well as in speculation and i did sold all my shares in the same financial year(Sale/purchase in same FY}. but my CA made mistakes
1-he entered my delivery shares(few) entries in speculation loss. resulting to high speculation loss and less delivery loss.
2-shown less brokerage charges and balance brokerage included in total speculation loss.
3-i am having business income which would have been adjusted in delivery loss in case right ITR by my CA.
NOW how i should proceed. please let me know.

It is mentioned that there should be consistency with respect to classifying gains/losses from delivery based trades, either as capital gains or as business income. However, say, I do a job for a few years, during which I report my delivery based gains/losses as capital gains. But a few years on, I leave my job and take up trading/investing as a full time activity. Then, do I need to change the way in which I classify gains/losses from my delivery based trades, and report them as business income?

Hi Nithin,
Thank you for being patient in replying to numerous queries directed at you. Here’s another one.
I am filing ITR 3 with audit as my business income is less than the threshold specified under Section 44AD. Delivery equity profits and net loss from F&O combined together yield a profit of ~ 90k on a turnover of ~ 1 crore.
My query is that in ITR 3 form ->
a) Where should i mention the delivery equity profits so that it’s considered as business income. There is a specific heading In ITR3->P&L-> Other income “Profit on sale of investment being securities chargeable to Securities Transaction Tax (STT)”. Is this the place to specify the profits ? Or, Should i mention total sale value under operating revenue and then enter the cumulative cost of acquiring equity delivery shares under Purchases heading [ITR3->P&L] .
b) Regarding F&O losses -> If I have correctly interpreted your previous responses. Do I have to proceed like this ? Cumulative Positive settlement from F&O segment has to be shown under Operating revenue. And,Cumulative Negative settlements, net of charges, have to be shown under Purchases heading. Is my understanding correct ?

I was just checking my Tax P&L statements (Equity) and figured that it just considers the transactions of shares that are bought and sold within the same financial year, but not the ones which are bought and sold in different financial years.

For examples, shares that I bought in Feb 2018 and sold in April 2018 are not part of Tax P&L statement for FY2018-19 in my Zerodha Q dashboard. How are these transactions taxed and what is the most effective way to retrieve them in Zerodha Q dashboard ?

Hi,
I understand form the above chapter that i need to file ITR3 as the income from business, speculation and short term CG.
I feel it tough to fill in the details in ITR and so below are my queries,
1. In which part to report speculative income?
2. In which part to report business(f&o) income?
3. For short term and speculative (intraday) income, how to report the expenses incurred for trading because in ‘tax p&l’ report from zerodha, only total charges are given. So how to calculate the expenses incurred seperately for short term and speculative.
It would be helpful if someone assist me.
Thanks in advance

I’ve read your post and multiple queries and responses (though not all). Haven’t been able to get a solution to my queries as yet

Myself and family hold multiple demat cum trading accounts with you. We’re all investors and thus I was hoping that at the end of the year I’ll be able to simply extract a capital gains report which I can then use to file my tax returns. Unfortunately, the various reports I get from Q are firstly incomplete (Tax P&L doesn’t have sale and purchase dates!!!) and some transactions are also missing (especially buybacks and OFS across all accounts). Data is also incomplete in Trade Data

This year I had to manually prepare this data (for FY17-18). I’m sure I can’t do it next year. Are you planning to improve on the reporting?

I have shares in my demat account received from my father more than one year old.I have no records of date of purchase ,cost of share etc.If i sell those shares what cost to be considered.I hope value as on 31 jan 2018 to be taken as cost after the new tax rules on shares and profit above one lakh will be taxable .Kindly clarify.

The functionality called out in
“If you are trading at Zerodha the holdings page in our back office assistant Q will keep a tab for you on number of days since your holdings were purchased, and even a breakdown if bought in multiple trades.”

Today i am new to share trading. Today, i came to know about MIS leverage in intraday trading. Suppose i have fund of around Rs. 100000 in my Zerodha a/c. I got MIS leverage of 10x times in a particular shares and share price rs 1000. Hence, I can buy 1000 shares worth of Rs.10,00,000. Following are my questions regarding the above scenerio:

1. Is it essential to apply stop loss in MIS?
2. What are the consequences if i cant make profit for the day. Suppose if the share falls to Rs 900 and I did not put stop loss.
3 What will be my actual loss from the above example? Will I loss all my Rs 1,00,000 (100×1000) that was in my a/c or I will loss Rs. 10,000 i.e. Rs 100(share price down by Rs.100) x 1000 (No of shares).
4. what are the other impacts of intra day loss using MIS leverage?

1. Not mandatory.
2. It will automatically square off positions if you make a loss more than 50% of your capital. If for any reason it doesn’t, you will have to make up for the losses. In this example, you would have lost entire capital.
3. 100 x 1000 = Rs 1lk
4. Profits and losses can be exponentially higher.

Hi Karthik,
first of all my compliments for providing us encyclopedia of stock market via zerodha varisty..
my query is, u have mentioned that if we do off market transaction then we have to pay more tax, but u have written If the transactions (buy/sells) are executed through off-market transfer via delivery instruction booklet and not via a recognized exchange then LTCG is 20% in case of non-listed stocks, and 10% on listed stocks which is same i.e 10 % LTCG for transaction carried out via exchange.
i am bit confuse in this, please explain.

hi nithin, i have my demat account on zerodha. I only do cash delivery trades hence i am liable for STCG only. Thus 15% flat tax will be imposed on my STCG profits. My salary is around 10 lac. My current STCG profit is 1.5 lac. Now should i pay only 22500 as STCG tax or it would also add as per my tax slab so that my net income become 11.5 lac then pay my taxes?

one more question sir…
if i invest all of 8L in equity shares should i show the source of that money? as i had earned only 2.8l for which i have filled the returns and got the TDS back?

i read in the article that if we do intraday trading we have to file ITR 3..
i did only one intraday trading by mistake as it waz default in kite app… should i file ITR 3 this year? does it requires expertise to file ITR 3? i had filed ITR 1 by myself..

if we buy share in CNC and sell on same day does it count as intraday trading? is it considered as speculative income..?
can it be ignored as the profit i earned was in few paise..?

thanks for wonderful article explained beautifully sir.. any layman can read your article and get insight on this….

Yeah, source of money has to be shown. Gift from parents not taxable. If it is just one or few trades, don’t use ITR3, you can using ITR2. Yes if you buy and sell CNC on same day, it is still intraday. But if it is extremely small in terms of turnover, you can show them as investing itself.

Yes. If you have mutual funds on which you have booked profits and you are holding onto funds which have unrealized losses. You can exit the one with losses, book it and set off the taxes on the realized profits. You can repurchase the exited mutual fund again the next day.

thanks again for answering sir… its gives us immediately confidence to trade in your platform when the CEO of the company cares to reply to his customers…

but one suggestion sir.. as i m new to trading i have inquired those by raising tickets 3_4times… but most of the time your faculty gives generalized answers…. it forces us to reopen the ticket and we ll get clarity after having to reopen the same ticket 2-3times… it would be nice and time saving to both if they just answer specifically as you do here…

Dear sir i recently opened my trading account with you, my query is i am unemployed i.e i have no fixed income from any source and if my STGC, LTGC or any capital gains from stocks below Rs 2,50,000, Do I have to file any ITR and or I have to pay 15% 10% tax pls clarify.

sir how do i disclose the amount gifted by my father to me?
if the amount gifted is around 10-15 lakh(assumed)..but the short term profit by investing this in equity(no other income) is less than 2.5lakh in the financial year, is it absolutely necessary to file ITR? (ITR 2)?

for your information my father is govt employee with income in 2.5-5lakh slab..

Hi Nithin, I was reading through the comments and it is highly commendable that you are still answering the queries and it is over 3 yrs. I read almost all of the comments but yet to find any answer for my doubt. I am an investor and holding some shares since 2012. Some of them are making profit and some are in losses. Now here are my questions:
1. I sold some shares and with the amount received I again purchased new shares. Now do I need to pay LTCG tax (if it is over 100,000) or show that in ITR?
2. For loss making shares, which price will be considered, the one on which I bought or the price on 31 Jan 2018?

Thanks for answering those queries:
1. And the profit will find its place in ITR only if it is above 100,000 for that year. Correct?
2. Will profit be added to my income and then taxed according to slab or is it 10% flat on any profit above 100,000? (I don’t have any income source).

Congrats! Saw a news item that you are now No 1 broker in India. You have done this by keeping investors like me very happy.

Few queries please…
1) Can long term loss on shares be setoff with long term gain in NCDs? Both have same taxation rates of 10.3%.
2) For the past few years I was earning much of my income from consulting fees. I was using ITR3. This year I have nil income from it and most income is from FDs and NCDs (and loss from shares). These are all delivery only transactions (no trading). Which ITR should I be using?

I am new to zerodha and trading, In past 2 months I have purchased and sold many equity shares multiple times. The gains from the the market I have reinvested again in market. Haven’t done any withdrawal to my bank account yet.

Could you please tell me if I will have to pay STCG on the gains and how can I calculate it through Zerodha statements or Zerodha will send a consolidated statement at the end of FY.

Sir,
I wanted to know, if i earned 3,00,000/- Rs of Profit Annually through M.I.S. ( Intraday Trading) after deducting all taxes (like brokerage Charges etc) and i have no any other source of Income. Then Please tell me. Do i have to pay Any kind of tax on this profit. if yes than what would be the slabs of tax for this income.

U have to pay taxes as per income tax slab. First 2.5lks no tax, and between 2.5 to 5 at 5%. So at 3lks, u would have to pay 5% of Rs 50,000. But from next year (after budget news), there won’t be anything for under 5lks.

Quite happy to see that Nitin Kamath himself is directly providing input clarifying several points. Only one point, I rather could not locate or might have been missed:

What if some one has held the stock for more than one year by 31-03-2018, but sells now before 31-03-2019? I do recollect something like no tax on LTCG if sell price is less than or equal to highest price as on 31-01-2018. Can some one throw light on this – confirming or contesting?